Research and Development RFP: Procurement Assists with Innovation

by Kristin Floyd, MBA
University of Virginia

I cringe when I hear the term “sole source.” That term eliminates the majority of the influence I, as procurement professional, have in a transaction. Once a vendor knows it is the sole source, it also knows it has the upper hand in negotiations. The sole source justification takes time, and the process involves individual negotiations that are administratively burdensome, time consuming—and they may not always result in the best terms for the university. The sole source process is pretty common among public universities. In 2015, I was spending practically my entire day issuing sole-source purchase orders. These were mostly associated with research, and many research commodities are highly specialized. I knew the procurement role could add more to the process; I felt there had to be a better way to leverage my value and facilitate the research activities I wanted to support.

In April 2016, at the University of Virginia, I took on the challenge of helping Procurement and Supplier Diversity Services (PSDS) increase research activity and improve purchasing effectiveness. My goals were to: (1) streamline the research contracting process, (2) obtain the best possible pricing, and (3) ensure compliance with federal, state, and university requirements. I knew that we had an effective tool in the Request for Proposal (RFP) process and that world-class research requires specialized, hard-to-procure supplies, equipment, and services. We issued a blanket RFP to negotiate, in advance, optimal terms and conditions with vendors for Research and Development (R&D) goods and services. Rather than handle each transaction at the time of the order, PSDS leveraged the RFP process, eliminating the time-consuming effort of sole source justifications, and it succeeded in making quite a few researchers happy, by reducing workloads.I cringe when I hear the term “sole source.” That term eliminates the majority of the influence I, as procurement professional, have in a transaction. Once a vendor knows it is the sole source, it also knows it has the upper hand in negotiations. The sole source justification takes time, and the process involves individual negotiations that are administratively burdensome, time consuming—and they may not always result in the best terms for the university. The sole source process is pretty common among public universities. In 2015, I was spending practically my entire day issuing sole-source purchase orders. These were mostly associated with research, and many research commodities are highly specialized. I knew the procurement role could add more to the process; I felt there had to be a better way to leverage my value and facilitate the research activities I wanted to support.

The “Problem”

One of the main objectives at the University of Virginia is to be responsible for the integration and enhancement of research activities across eleven schools and multiple research centers. Prior to issuance of the R&D RFP, principal investigators, lab technicians, and professors (our “clients”) were typically procuring their needed goods and services through two main methods: use of the previous 20 supply contracts negotiated by PSDS or through sole source justifications.

To justify a sole source purchase the clients had to complete paperwork explaining in great detail why the goods or service was necessary. The process was especially cumbersome for the client, as it often came after a lengthy grant-seeking and grant-writing effort. Procuring the resources necessary to complete research was often the final step before the research could begin, and often, this additional paperwork and approval process within PSDS was viewed as an administrative burden. It also represented an imaginary roadblock—frustrating for both PSDS and the client.

Fortunately, there was a commonality between PSDS and its clients, even though the expectations of both parties were different. PSDS had the expectation that the client would select a good or service and seek competitive quotes according to legal procurement regulations. The client had the expectation that the good or service had already been defined and approved by the entity that awarded the study. Scientific studies must be replicated exactly, and any deviation to the original study could cause alternate results. Therefore, in order to replicate for strict continuity of research, the client viewed the purchase as a sole source from the start. PSDS professionals spent time assisting clients with developing justifications, performing market surveys, determining price reasonableness, and completing other additional paperwork. This was a time-consuming process that often caused stress between the client and PSDS. Rather than spend valuable time performing research, clients were completing forms that did not
add value.

After much collaboration with the research community, it became clear to me that this difference in expectation was not benefiting either group. PSDS agreed to build a program to suit our clients’ needs. This program would have to accommodate a diverse array of research areas, reduce administrative oversight, and empower clients to timely complete their studies. PSDS ultimately envisioned an advantageous scenario such that the administrative burden could be lessened and innovation could once again be the guiding objective.

Design:
Understanding Scope

Typically, an RFP seeks to award to only one or two vendors. One of the goals of the above-referenced program was to negotiate and award contract status to as many R&D vendors as possible. This would be necessary in order to accommodate most of the research activities at the university. Initial reporting suggested that close to 300 vendors could meet the requirements for contract status. The goals were to automate these purchases using the current e-commerce marketplace and successfully negotiate beneficial terms and conditions to govern the relationship. At first, it seemed like an impossible task for just one department. With this massive increase in projected awards, PSDS had to redesign many variables of the standard RFP process.

RFP Document

Taking the commodity into consideration, we saw that the industry was always changing and innovating, and there would be no way we could keep up without doing the same. We began to break down the variables regarding the sole source transactions to ensure that the RFP captured those and satisfied our purpose.

We started with the RFP design. The goods and services section was intentionally written to accommodate a range of potential vendors. One of the most common reasons for a sole source justification was that the provider was the manufacturer or authorized distributor and, therefore, the only source. So we limited proposals to include only manufacturers or authorized distributors. This accommodated the majority of the previously identified sole source scenarios.

Language from this section included:

This R&D Request for Proposal
will include: a broad spectrum of goods and services that are procured to increase scientific knowledge, apply increased scientific knowledge, or explore the potential of scientific discoveries and improvements in technology to advance scientific knowledge.

In order to achieve this goal the Selected Firm(s) may be requested to provide those goods and services that will be included in one or more categories of supplies as outlined in this section. Firms are encouraged to identify a niche or specialty category that is associated with the strengths of their business model.

The RFP was structured to include various categories for R&D goods and services; initially we were able to identify seven. We included a final category as a safety net of sorts that could potentially accommodate multiple vendors who were not otherwise addressed. The commodity
categories included:

Laboratory Equipment

Microscope Equipment
and Services

Laboratory Animals

Laboratory Chemicals

Equipment Maintenance
and Testing Services

Life Science Materials
and Testing

Medical, Dental and
Orthopedic Supplies

R&D Goods and Services

Specialty Goods and Services

Vendors had the option to apply for one or more categories. PSDS retained the final approval.

Pre-Qualification Criteria

In order to further streamline the process, PSDS developed mandatory pre-qualification criteria to ensure that specific university needs were met. These criteria also set a baseline for determining those vendors that would be eligible for award, and they greatly facilitated the selection committee’s approvals. The criteria included:

  • Selected Firm(s) must provide Representative(s) to be available either on site or remotely.
  • Selected Firm(s) must provide a discount on goods and/or services.
  • Selected Firm(s) will offer electronic commerce capabilities. Specifically, either electronic invoicing, electronic ecommerce catalog, or both.
  • Selected Firm(s) will provide warranty or guarantee on goods and/
    or services.

The pre-qualification criteria were essential during the proposal acceptance process because they guided the determining of minimum vendor capabilities and they initiated a dialog of the expectations for doing business with the university. Enablement of electronic commerce capabilities for some of the vendors meant reduced administrative effort, cost savings, and easier placement of orders by the client. An added benefit was that PSDS resolved many of the issues that vendors had previously encountered in navigating the university’s procurement processes. Some of these issues included incorrect invoice submittals, old contact information, and uncertainty about appropriate contacts in client departments.

Open Enrollment

PSDS borrowed a principle of agile software development; it built into the RFP the ability to develop incremental releases and provide multiple iterations. The RFP would need to be flexible to accommodate new industry and new developments in the research community. Therefore, the RFP was structured to include iterations known as “generations” and featured an open annual enrollment period. This would allow for modifications and the ability to accommodate changing needs. Clients would have the opportunity to communicate expectations for purchases with PSDS, sustain competitive offerings from current contract vendors, and identify new R&D vendors with desirable potential for contracting. Each iteration of the RFP allows for review of the previous terms and room to make adjustments. It facilitates further user involvement, and provides for the client frequent delivery of relevant contracts. This method is ideal for research because innovation is always transitioning. Keeping up with the industry was simply unachievable through single RFPs. In addition, the open enrollment allowed for strategy discussions over what research would be next and how PSDS could assist.

Vendor Proposal
Contracting Form

To streamline the proposal review process and enable ease of award, we created a “vendor proposal contracting form” (VPCF) and added it to the proposal requirements. The VPCF served two main purposes: (1) the main method for vendors to submit proposals and (2) the vendor master agreement with the University. With issuance of the RFP, PSDS provided the VPCF in Microsoft Word and Adobe Fillable Form formats. Vendors would complete the VPCF, which provided only the necessary information to determine if the vendor was eligible for award and was in agreement our terms and conditions. This significantly streamlined the review and award process, because each proposal was presented in the same structured document, and specific information was located in the same place within the document.

PSDS captured negotiations on an attachment document, combined with the original VPCF. This attachment, combined with the original VPCF document, became the master agreement after award.

Further streamlining efforts included requiring that vendors submit only electronic proposals through an online portal. It gathered initial information that was later used to create a contract summary page for the vendor, and it facilitated creation of a webpage for the vendor contract. This produced an online presence for cooperative access and provided information on sales contacts and vendor pricing.

Implementation

During the RFP process, vendors submitted information regarding offered products and services, qualifications, references, and warranties. A selection committee comprising researchers and administrators reviewed these submissions. PSDS then contacted vendors who met the pre-qualification criteria to develop desirable contract terms and conditions. PSDS wanted to take these contracts a step further, and with the help of the Virginia Higher Education Procurement Consortium (VHEPC), PSDS leveraged volume across our university and other Virginia institutions to negotiate best value pricing and standard terms around discounts, payments, shipping, and installation. The RFP also had the additional effect of increasing opportunities for small, women-owned, and minority-owned businesses.

By the end of October 2016, all 70 vendors who had submitted proposals had been contacted for negotiation; 43 had been awarded contracts. Management of this project involved the PSDS director, one buyer, a contracts administrator, a marketplace ecommerce manager, a supplier diversity representative, a procurement analyst, an accounts payable vendor-file specialist, and the Virginia Higher Education Procurement
Consortium (VHEPC).

Soliciting Proposals

The bulk of the work involved communicating the value of this RFP to vendors and soliciting responses from them. The RFP was posted publically on both the PSDS website and the Commonwealth of Virginia’s eProcurement Portal. In spite of the posting, PSDS still needed to inform vendors of the value of contracting with the University. Many vendors were not aware of the administrative work regarding sole source justifications and had become accustomed to receiving orders under that method. In addition, to many vendors, the concept of cooperative contracting was new. PSDS enlisted the assistance of its director, Eric Denby, who personally made phone calls and sent emails. This approach was met with moderate success, due to limited available contact information and because initial sales contacts had little involvement with negotiating and forming contracts. PSDS did determine that the most value was gained when the client engaged the vendor directly and promoted the RFP as a condition of purchase. PSDS wants future iterations of the RFP to be a combined effort promoted by the client, as this method appears to have the most impact. PSDS has provided clients and vendors with a portal through which they can communicate the contact information of vendors targeted for future generations of
the RFP.

PSDS also partnered with other universities under VHEPC to add vendors to the program. With the added cooperation, PSDS met the needs of researchers at those
other institutions.

Supplier Relationship Management

New vendors not familiar with doing business with a university required a significant amount of training on university practices, so that service levels start out high and remain so. Processes like proper invoice submission, delivery location definitions, and how to find information for department contacts all needed to be communicated. The university issued a handbook to all awarded vendors to outline these necessary procedures and expectations, and to provide information toward building successful business relationships. PSDS, with the assistance of the RFP selection committee, established performance criteria. This ultimately led to insight into client expectations. PSDS also created a set of standard reports based off the criteria and a plan to institute key-vendor business reviews each year. Vendors must meet certain volume and activity requirements to be eligible for
business reviews.

Marketing

PSDS found that the clients also did not initially grasp the concept of a vendor becoming a “contract vendor” and the value this designation provided. The sole source process had become the norm and anything else was an exception. Communicating the value of the RFP to clients became an initiative that required marketing assistance across the University. PSDS used multiple marketing methods. One unique method was the PSDS’s partnering with the university’s Sustainability group to promote the new contracts that could be related to the group’s Green Labs initiative. Word spread quickly about the resulting efficiencies. Clients began contacting me directly to request PSDS to solicit additional proposals. By 2018, the program had awarded contracts to more than 100 vendors.

Benefits:

Cooperative

From inception, this RFP concept contemplated including research vendors on behalf of all Virginia Public Higher Education institutions. The contracts include language that allows other Colleges and Universities to access the agreements and discount structures. UVA, serving as the lead agency, worked closely with VHEPC to meet the cooperative criteria. VHEPC played a critical role in all stages of this RFP, to include data aggregation and analysis, negotiations, and post-award contract advertisement to the twelve member Universities. The benefit is that vendors enjoy increased volume while Virginia’s Colleges and Universities gain access to best-in-class pricing.

Sole Source Reduction
and Automation

Purchase orders issued to the research vendors do not now require sole source justification; competitive requirements are satisfied with the RFP award. Clients are able to issue a purchase order direct to the vendor in the ecommerce marketplace, without routing through PSDS for approvals. In 2017, the University issued about 16,000 POs to the vendors in the program. Client usage of the current ecommerce system has assisted in facilitating business with these vendors. Vendors with ecommerce catalog capability have been able to take advantage of this functionality in the UVA marketplace, enhancing and further automating the experience. The University plans to add 30 new marketplace catalogs as an initial result of this RFP.

Unanticipated Benefits

  • When the manufacturer does not offer the best price:

Within the first month of making awards, PSDS received a requisition for a large piece of equipment from a specific manufacturer as a sole source justification. PSDS determined that one of the newly awarded authorized distributors from the RFP could also provide this specific item. PSDS was able to negotiate with the awarded vender a price lower than that offered by the manufacturer. The client saved money, the new vendor received its first PO from the University, and PSDS processed the requisition as a contract rather than through the sole
source maze.

  • When faculty can anticipate costs of lab startups:

Departments have taken advantage of the program by contacting PSDS when they have new faculty arriving and need assistance with quoting startup packages. This supports departments by providing detailed insights into budgeting, and it allows PSDS to engage contact regularly to promote the program’s benefits.

Conclusion

This RFP has created an increase in value for PSDS relative to the research community. Clients are beginning to notice the decreased need for sole source justifications and are asking questions about how to set up more vendors. The added incentives of favorable contract terms and initial discounts facilitate efficiencies in the clients’ purchasing decisions. Terms like free shipping, warranty information, and insurance requirements are all benefits of doing business with a contract vendor, and clients now go to these vendors first. Clients are beginning to anticipate large purchases and are now communicating these plans with PSDS. They are also leveraging the relationships between the manufacturer and distributor to negotiate better deals.

The R&D RFP program has improved PSDS’s ability to be proactive. Rather than making a client justify a purchase, PSDS can now provide the client the tools it needs. This methodology enables the larger university vision of good stewardship of university resources. It also helps PSDS serve a much more productive role in supporting
innovative research.

If you believe these cooperative contracts may benefit your program, feel free to explore the following link, http://www.procurement.virginia.edu/pagecontracts.

[Featured image: ©ISTOCK.COM/ShowVectorStudio]

 

Kristin Floyd, MBA, is a Senior Buyer with Procurement and Supplier Diversity Services at the University of Virginia (UVa). She worked for a pharmaceutical manufacturing firm prior to coming to UVa in 2012 and has a total of 10 years of experience in the procurement profession. She holds a B.S. in Communications from Old Dominion University and an MBA from Liberty University.
Email: kaf4b@virginia.edu.